ZST Digital Networks: Deceptive Business, Bad Investment

Ben Axler submits:ZST Digital Networks (ZSTN) came public in October 2009 and raised $25 million by offering 3.1m shares at $8 per share. The offering was led by Rodman & Renshaw and Westpark Capital, two ubiquitous underwriters in the market for bringing Chinese companies public in the U.S. through reverse takeovers (RTOs). There are plenty of recent examples of why investors should be highly skeptical of purchasing shares in these Chinese RTO companies. Many lack transparency, internal controls, exaggerate their financial performance and assets, have weak governance, and in some cases are outright frauds. Look no further than China-Biotics (CHBT), Orient Paper (ONP), Douyuan Printing (DYP), China New Borun (BORN), China Marine Food Group (CMFO), Fuqi Int’l (FUQI), and China Northeast Petroleum (NEP) as cautionary examples.Complete Story »

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Ben Axler submits:Last month ZST Digital Networks (ZSTN) reported its Q3 results. Yet again, the company reported glowing results, indicating that total revenue for the period was $38.5 million, an increase of 34.6% compared to Q3 ’09, and net income grew to $6.4 million, an increase of 94.7% compared to Q3 ’09.

Chinese Company Analyst submits:Over the past few months, the topic of financial filings with China’s State Administration for Industry and Commerce (SAIC) has made frequent appearances within the U.S.-listed Chinese RTO (“reverse takeover”) sector. I and other critics have advocated that AIC filings are important data points in determining whether certain Chinese RTOs are falsifying their SEC financial statements.

Plug Power Inc (PLUG) raised $124.3 million yesterday in what was the biggest sale of its stock since the company went public in 1999. In a secondary offering of its stock, the fuel cell company sold 22.6 million shares for $5.50 apiece, far more than the 15 million shares it had initially planned to sell. Plug Power holds over $150 million in cash after the latest offering.

In the depths of a deep IPO freeze last year, investors warmed up to Cardinal Energy Ltd.’s $225-million public offering, lured by the company’s dividend model.
“Cardinal was successful as there was a trend through 2013 to dividend-paying corporations led by WhiteCap Resources Inc., Surge Energy Inc. and Torc Oil and Gas Ltd.,” said Darrell Law, managing director, energy at Royal Bank of Canada, which co-led the deal along with Canadian Imperial Bank of Commerce.

By Adam Gefvert:Yesterday, AER Advisors, in tandem with wine mogul Peter Deutsch, released an SC 13D filing for ZST Digital Networks (ZSTN). They are continuing to accumulate shares as I predicted they would here.

By Adam Gefvert:Through using the mosaic theory, I had created the hypothesis that China Medical Technologies (CMEDY.PK) and ZST Digital Networks (ZSTN) are in the process of being taken off the US exchanges and taken private.